The Steam Oil Production Company (“Steam Oil”) is pleased to announce that it has entered into a cooperation agreement with FluidOil, the independent international heavy oil technology company, to explore the potential of integrating FluidOil’s Viscositor Heavy-to-Light (“VHTL”) oil upgrading technology into an offshore steam flooding project.

Steam Oil has a feature article in this month's edition of Offshore Magazine; just click on the cover page below to read the article which lays out for the first time some of our plans for a steam flood demonstration project on the Pilot field.

When we talk to folk in the industry, about our plans to steam the Pilot, Elke & Narwhal fields in the middle of the Central North Sea, sometimes we get a pretty sceptical reaction, sometimes we don’t. I prefer it when we get to talk positively about the potential of steaming offshore reservoirs, but not everyone has an open mind. You see, that’s not how the industry develops heavy oil in the North Sea. How to develop North Sea heavy oil was all worked out in the early nineties by the people who put together the development plans for Alba, Captain, Harding & Gryphon, the last wave of heavy oil developments in the UKCS.

Crikey, we are half way through May, that's half way through the second quarter of 2016, and so far this year there hasn't been a single new field development plan approved by the OGA. In fact there hasn't been an FDP approved since Scolty & Crathes in October last year, over six months ago. Don't blame the OGA, they can't approve what hasn't been submitted. It is all of us, in the oil and gas industry, who haven't managed to get a project ready enough to make that formal FDP submission.

When we are presenting our plans to fellow professionals, we often get asked, why steam from the start, surely steam flooding is an EOR technique? It is a good question, as generating steam is not cheap, of course we have a good answer to the question and the more we think about it the better the answer gets.

I read lots of commentary claiming that only now (when Brent is less than $35/bbl) are we getting back to the long run average oil price, which of course is where some economists think it should be. Of course nothing has changed since 1861 so the price back then is just as relevant as last year's price... or perhaps the geology has got a little tougher, and safety standards improved a tad. But the kind of economists who believe in long run average prices probably also believe that technology is making things in the oil patch cheaper and cheaper.

Back in February, I wrote about how I expected upstream capital costs to fall as the oil price collapsed,  and then in July, I wrote again with an update on how the IHS UCCI (Upstream Capital Costs Index) had actually fallen up to that time. Well, this is a further update on that, mixed in with a bit of speculation on how far the fall might go before we touch bottom. 

Back in February 2015, Bob Dudley, BP's CEO, said in a Bloomberg TV interview that the fundamental supply and demand picture remind him of 1986 where we could go into a period of lower oil prices perhaps staying in a range below $60/bbl for as long as three years. He added "It will be a long time before we see $100/bbl again." I suspect it will roll along a little sooner than that, but that might just be wishful thinking on my part.

Everyone knows  J. Paul Getty's formula for success: rise early, work hard, strike oil; and pretty much everyone I know in the oil business rises early and works hard, some of them even strike oil. So it's hard to find many oil folk who don't believe in the quote, of course the tricky bit is the last part of the aphorism. Striking oil generally requires a decent dollop of good fortune as well as brilliant geoscience and that elusive material, money; however when we do strike oil these days we generally manage to keep it in the well unlike these pioneers in times past who needed to have a decent turn of speed when they struck oil.

I spotted a very interesting chart from Gregor MacDonald that showed world oil production over recent years excluding the USA. The chart was pretty flat and that got me to wondering about how much the world has come to depend upon Light Tight Oil in the USA and for that matter Steam Assisted Gravity Drainage projects in Canada.

What do I mean by conformance control, well it's just a fancy engineering term for producing, or injecting, more of what you want and less of what you don't want. In the oilfield we use the word to indicate that we have done something to the downhole configuration to direct fluids where we want them to go. 

When we have been talking with potential investors and partners about steaming the Pilot oil field, we have often been asked who else steams oilfields? Most people knew about the Canadian oil sands and the steam assisted gravity drainage (SAGD) schemes which are coming on stream at pace over in Canada. But many fewer were aware of the steam flood projects which have been very successful in California, Venezuela, Indonesia and right here in Europe.

Everyone knows the oil and gas value chain. Working forwards it is all pretty obvious, first of all you get the acreage, then you explore, shoot seismic and drill a discovery well, boom success. That is the investment story of most E&P juniors, that is capital E and small p juniors.

I wrote earlier about why 3,000' is the conventional limit for steam floods and this is a follow up note exploring some ways that we could increase that limit. It has some significance. For the UK sector of the North Sea at least, we have estimated that, if you could push the limit down to 4,500', the incremental recovery possible could be more than 2 billion barrels of oil. Almost as much oil as in Johan Sverdrup, if that isn't worth thinking about what is?

Steam injection has a pretty remarkable ability to drive out almost all of the heavy oil from highly permeable reservoirs but it is costly to generate and there is a lot to be gained if you could improve the overall efficiency of the process. The inventor of the SAGD process, Roger Butler, also invented another process which uses solvents instead of steam to mobilise the heavy oil. That process is called VAPEX and involves the injection of a hydrocarbon solvent, such as propane, butane or naphtha

We have been developing heavy oil in the UKCS for well over twenty years and the recovery factors that oil companies have managed to achieve in the fields developed back then range from moderate (23%) to fantastic (74%), but have averaged about 50%. The most recent spate of development projects are all envisaging recovery factors that are quite a bit lower, just 22% on average, if we ignore the Pilot steamflood. Does this mean we have all lost our mojo or that technology has gone backwards? It might seem so but when I analyse it in detail you will see that it is the nature of the reservoir and the oil that drives the likely recovery factor.

When you are checking out the screening criteria for a successful steam flood, the depth limitation might seem a little surprising. You expect to see the oil saturation and reservoir quality limits and intuitively we all know steam flooding is for heavy oils; but why does depth feature and how many reservoirs are shallower than 3,000' anyway? 

When we first start to talk to potential partners or investors about steam flooding the Pilot reservoir there are often sceptical looks and occasional concern that I might have lost my mind. A favourite question is "Well are there any offshore steam floods?" The answer to that is "Yes, but not many."

To petroleum engineers' ears, attuned to the recovery factor that one can expect from a water flood (typically 30% to 40%, and only occasionally over 60%) the recovery factors that steam flooding can deliver, somewhere between 50% and 80%, seem inordinately high. A pinch of salt seems the appropriate accompaniment to the kind of claims that are routinely made for steam flood projects. But Chevron is one of the acknowledged leaders in the application of steam flooding, and their assessment is that a typical steam flood should recover between 50% and 80% of the original oil in place.

The development of heavy oil in the UK goes back further than most people realise. All the way back to 1787, in fact. That was when miners struck a spring of natural bitumen while digging a canal tunnel for the Coalport Canal; indeed, with a little imagination the “Tar Tunnel” might be described as the UK’s first horizontal production well.